Jan./Feb. 2021 Issue

Update On The New Normal: How To Stay Competitive In A Customer, Data And Digital-First Environment

Pricing is at the heart of how lenders should manage risk, trade value with customers and drive sustainable, profitable growth. Because of this, lenders need smart solutions that can help their loan officers optimize their pricing and stay ahead of the competition.

While most lenders would likely say their price setting and optimization capabilities are advanced, a recent American Banker survey explained that “fewer than 6 out of 10 respondents reported they are highly effective in managing various aspects of the pricing process.” Unfortunately, with pricing playing such a significant role in lenders’ (and loan officers’) overall success – and especially considering how customers are savvier than ever before, this is a big problem. We are still living in the wake of the pandemic and part of this “new normal” means customers have more time (and screen time). For many, this means spending it doing their homework. With more competition than ever before, lenders need sophisticated pricing solutions that arm their loan officers with a pricing-centric strategy to become advocates for their customers.

When the pandemic hit last February, the industry was upended as branches closed and new bursts of digital solutions were implemented quickly across the nation. Digital strategies that once had 10-year plans seemed to be executed months or even days – either way, much faster than anyone had originally anticipated.

As interest rates moved closer to zero, interest income streams evaporated and deposits fled to safety, creating excess but unproductive liquid it. This ultimately saw lending begin to slow significantly. However, this also created a new opportunity for the mortgage industry, with loan officers starting to refocus efforts and attention toward serving their customers rather than simply selling to them.

While many of the pandemic’s disruptions may be temporary, others are likely to stick around much longer (for example, the shift in accelerated digital advancements and renewed focus on better serving the needs of the customer). As both the economy and the mortgage lending industry lean into this “new normal,” lenders and loan officers need to consider how pricing will be impacted by these changes.

Customer-centricity will be key in standing out in the crowd.

With near-zero interest rates making broad rate offers untenable, successful banks and lenders will both dig deeper to personalize pricing to their customer’s sensitivities and motivations, as well as take a more holistic, customer-centric view of offers to acquire more customers and maintain their loyalty.

Taking a strategic approach to setting prices for each mortgage and each customer begins with factoring in pricing differences across different states and even in neighboring communities. Even with a national average for mortgage rates, pricing can differ across regional markets. To become a trusted advisor, lenders need access to in-depth pricing data.

Without access to real-time, granular pricing data and analytics, loan officers are stuck with outdated information. This leaves them with a major margin management problem, risking underpricing and making less on each loan or overpricing and losing the customer’s business altogether. Taking a more strategic approach to pricing means loan officers can win more deals and customers will reap the benefits as well.

Better data will elevate pricing analytics to a whole new level.  

While pricing analytics has matured, data –the fuel for analytics – has often been left behind. The search for better data is essential, especially as the industry heads into 2021 and embraces the changes, both long- and short-term, to come. This will be key to unlocking the next level of data analytics.

Lenders must also embrace comprehensive data in a completely new way, implementing innovative solutions that allow their loan officers to build and deepen customer relationships through competitive intelligence that will help them be more successful.

Digital is here to stay.

Going forward, agile, innovative, intelligent digitization is going to beat slow-moving strategy every time and lenders of all sizes are scrambling to deliver quick, personalized pricing and offers. This remains a challenge as too many loan officers are still relying on outdated information while carrying around rate sheets – trapped in mundane systems with far too many manual processes.  

Increasingly, today’s lenders find themselves having to do more with less. Making strategic moves towards better digitization options, infused with real-time, data-driven intelligence and processes, can help power and empower the decisions of front-line loan officers, and effectively solve the problem of digitalization in the modern world.  

The pandemic’s impact has touched everyone, adding an air of future uncertainty for many. However, one thing lenders can be certain of is embracing the shift to digital and renewing the focus on the customer are the keys to moving forward and succeeding. While talk of the “new normal” is nothing new, the industry is finally beginning to adapt to its changes. For those companies seeking to thrive, this means learning how to stay competitive by adopting a customer-centric approach, providing front-line employees with real-time, granular data and welcoming the digital changes.